Stamp Duty changes – how might they affect you?

“In this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin

Following the Autumn Budget Chancellor, George Osborne, decided to collect even more money from the public. In the budget Mr Osborne announced higher rates of Stamp Duty for buy-to-let landlords in an effort to curb the buy-to-let property market and encourage first-time buyers.

For anyone purchasing a second property after 1st April 2016, a higher rate of Stamp Duty will be payable. The higher rate is 3 per cent above the usual rate of Stamp Duty. The table below shows the current and new rates for Stamp Duty.

Purchase price of the property

Rates paid on the part of the

property price within each band

Higher Rates to be applied to

the second property

£0- £40,000

0%

0%

£0- £125,000

0%

3%

£125,001 – £250,000

2%

5%

£250,001 – £925,000

5%

8%

£925,001 – £1,500,000

10%

13%

£1,500,001 and above

12%

15%

What exactly is Stamp Duty?

Stamp Duty (SDLT) is a tax payable when you buy a property. It is calculated on the full price of the property. In 2014 changes were made to SDLT that meant if you were purchasing a property, you would potentially be able to save thousands of pounds, in certain instances. For example, for a property bought for £126,000.00, SDLT would previously have been £1,260.00. After the 2014 changes the SDLT payable would be £20.00.

Under the new rules, the higher rate of SDLT will become payable on the day of completion of a second property purchase. Under the new system a property purchased for £126,000.00 as a second home or buy-to- let investment, the SDLT payable will be £3,800.00 – a marked increase on the standard rate of SDLT!

Will the new higher rates of SDLT always have to be paid?

What if you own two properties now? Would you have to pay the higher rate if you replace one?

Well, that would depend on whether you were replacing your main residence. The higher rate of SDLT is not payable if you decide to replace your main home. It is, however, payable if you decide to add or replace your second home or buy to let investment.

What if you own a property in your sole name and your partner wants to buy a property?

In that case the payable rate of SDLT will depend on whether you are married or in a civil partnership. If you are married or in a civil partnership your spouse, you will have to pay SDLT at the higher rate. This is because you will be treated as one unit in the same sort of way as the Tax Credits system. If you aren’t married or in a civil partnership, your partner will not be required to pay the additional tax levy.

Will you have to pay the higher rate of SDLT if you have just sold your main residence but still own a buy-to-let property?

No – as long as you buy another main residence within 18 months of the original sale.

What if you can’t sell your current main residence but still proceed with the purchase of a second property?

You’ll need to pay the higher rate of SDLT unfortunately. If you sell the old property within 18 months, you will be able to get a refund, provided the property was a replacement for your main residence. If you are still confused about the new SDLT regime, or worried about whether you’ll have to pay the higher rate of Stamp Duty when you purchase a property, then Harold Stock & Co Solicitors can help you. To clear up any possible confusion we will be providing our clients with a more detailed factsheet.